Arguments for not hedging Hedging may eliminate potential gains from an increase in the value of the asset 2 Hedging is not free consumes some resources (CF,time etc.) 3 Agency theory management may not always act in the best interest of the shareholders(management is often more risk-averse than shareholders) 4 Shareholders are capable of diversifying currency riskArguments for not hedging Hedging may eliminate potential gains from an increase in the value of the asset 2 Hedging is not free - consumes some resources (CF, time etc.) 3 Agency theory - management may not always act in the best interest of the shareholders (management is often more risk-averse than shareholders) 4 Shareholders are capable of diversifying currency risk